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Walter Energy Jumps After Report Anglo, BHP Mulling Bids

The Walter Energy Inc. mining offices stand in Brookwood, Alabama, U.S., on Friday, Dec. 3, 2010. Photographer: Gary Tramontina/Bloomberg
The Walter Energy Inc. mining offices stand in Brookwood, Alabama, U.S., on Friday, Dec. 3, 2010. Photographer: Gary Tramontina/Bloomberg

Walter Energy Inc., a producer of steelmaking coal in southern Appalachia, jumped as much as 30 percent after the London-based Times said Anglo American Plc may be considering a takeover bid.

Anglo is said to be weighing a $120-a-share offer, the Times said in its market report without citing anyone. BHP Billiton Ltd. is also interested in Walter, the Times said.

Walter rose $15.99, or 21 percent, to $90.98 as of 4:15 p.m. in New York Stock Exchange composite trading. The shares pared gains after Walter said in a statement it isn’t aware of any “corporate developments” to account for the price increase. The stock earlier touched $97.30, the biggest intraday gain since March 8, 1995.

Walter, based in Birmingham, Alabama, hasn’t hired a permanent chief executive officer since Keith Calder resigned June 30. He stepped down about two months after he was appointed to the position, following Walter’s takeover of Canada’s Western Coal Corp., where he was the CEO. Investor Audley Capital Advisors LLP said in July that the company should explore a sale.

“Met coal assets are still in high demand,” Jeremy Sussman, an analyst with Brean Murray Carret & Co., wrote in a research note today. Metallurgical coal, also known as coking coal, is used to produce steel while utilities use thermal coal to generate electricity.

Takeover Bids

Walter said it issued the statement in response to a request from the Investment Industry Regulatory Organization of Canada on behalf of the Toronto Stock Exchange. The company said it doesn’t intend to comment further.

Surging demand from steelmakers in China and flood-related supply disruptions in Queensland, Australia, have driven prices for coking coal to record highs. Low-volatility metallurgical coal rose to $291 a ton, Energy Publishing Inc. said in its latest weekly report, published Sept. 2. It touched $330 a ton in February.

There were $20.15 billion of takeover bids for coal-mining companies valued at $100 million or more in the first nine months of this year, compared with $7.06 billion in the year-earlier period, according to data compiled by Bloomberg.

Peabody Energy Corp., the biggest U.S. coal producer, and ArcelorMittal, the world’s largest steelmaker, in August agreed to buy Macarthur Coal Ltd., a Brisbane, Australia coking-coal producer, for A$3.64 billion ($3.88 billion). Alpha Natural Resources Inc. became the world’s third-largest producer of coking coal with a $7.1 billion takeover of Massey Energy Co. in January.

Offer Unlikely

Anglo isn’t likely to make an offer for Walter, mainly because the U.S. company’s coal reserves aren’t in a suitable location for export by sea, London-based investment bank Liberum Capital said today in a note.

Citigroup Inc. also saw an offer as unlikely, “due to limited potential synergies,” and because the multiple of 5.5 times earnings before interest, taxes, depreciation and amortization is low compared with recent deals in the sector, Brian Yu, a San Francisco-based analyst wrote in a note today.

Anglo, which is based in London, also declined to comment in an e-mail. Kelly Quirke, a spokeswoman for Melbourne-based BHP, also declined to comment.

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